Investing Your Bucks in the Buckeye State: Why Ohio’s Opportunity Zones Are Poised for Growth in 2020
Thanks to the passage of the 2017 Tax Cuts and Jobs Act, Opportunity Zones have fueled economic growth in communities throughout Ohio. Clark Gable, famed Hollywood actor and Ohio “native son,” reflecting on his life, once remarked that he was “just a lucky slob from Ohio who happened to be at the right place at the right time.”
But, you can bet that he would have felt a whole lot luckier with Ohio’s economic Opportunity Zones now in place. Opportunity Zones offer a bevy of tax incentives to individuals and businesses that reinvest in economically distressed parts of the state at-large and the greater Columbus, Ohio region. Similar in some respects to New York City’s local Business Improvement Districts (BIDs), Opportunity Zones encourage financiers to invest their capital gains in businesses or properties in economically distressed, impoverished areas.
Today’s challenge, even three years after the birth of Opportunity Zones, is helping commercial real estate investors understand the law and how the specifics benefit them. Fortunately, the experts at The Robert Weiler Company have worked tirelessly to unpack all the details of Opportunity Zones. Let’s begin with capital gains, shall we? (But first, if you want to take a step back to the basics, check out The Conclusive CRE Guide to Opportunity Zones.)
What Are Capital Gains on Opportunity Zone Funds?
For definitional purposes, “capital gains” refers to any profit made by an investment in a business or property, or other purchase. So, for instance, say that you buy a commercial property. In several months, you sell the real estate at a profit. The difference between the price you paid for the property and the amount you sold it for is the capital gains.
Opportunity Zones allow you to reinvest that money in low-income areas throughout the state. The underpinning logic is simple: new monies infused in struggling neighborhoods will have a positive ripple effect in that given zone.
Ohio Economic Opportunities Make Cents
Much of Ohio’s residential and commercial real estate – and the communities in which the property exists – stand to benefit from the creation of these zones. The goals are to:
- reduce poverty;
- cut crime;
- create jobs;
- strengthen property values;
- increase local tax revenues; and
- help spur new business development.
While similar policies date back to the 1980s, what distinguishes Opportunity Zones is the degree to which pooled financial resources are encouraged. Using a well-established theory, targeting investment geographically will allow for more efficient long-term use of the allocated funds.
For Ohioans looking to jump on board, the time is NOW. As evidenced by the impressive jobs report in November 2019 (and by several critical measures), the economy has never been this robust. CNBC recently reported that the unemployment rate is at 3.5 percent while the hourly wage growth reached 3.1 percent. Today’s job market is unequivocally the best since December 1969, over 50 years ago.
Opportunity Zones Offer Incredible Tax Benefits
In terms of tax benefits, the advantages of investing in Opportunity Zones in Ohio are threefold:
- Tax deferment: Investors can delay paying federal taxes owed on their Opportunity Zone capital gains. Of course, Uncle Sam will still have to get paid, but not until the end of the Opportunity Zone program, slated for December 31, 2026. Payback could be earlier, however, if the original investment is sold or removed from the fund.
- Reduction of taxes owed: Opportunity Zone investors can anticipate a 10 to 15 percent federal tax cut. The tax savings stick as long as 90 percent of the money remains in the fund for a specific amount of time. The goal is to buttress properties and businesses within Opportunity Zones.
- Permanent exclusion from taxable income of capital gains: Investors can avoid capital gains taxes provided they have holdings in an Opportunity Zone for at least a decade.
Of course, these benefits apply only in designated Opportunity Zones, made through Qualified Opportunity Funds. However, few restrictions exist on what kinds of organizations can create and manage an Opportunity Fund.
A Qualified Opportunity Fund must be established as a partnership or a corporation. Naturally, said entity must adhere to all regulations stipulated by the Department of Treasury. In Franklin County (which includes Greater Columbus), there are 44 approved Opportunity Zones, divided into five areas. Across the state, approximately 320 census-designated tracts of land are eligible for Opportunity Zone inclusion.
An Opportunity Zone at Work
At The Robert Weiler Company, we look forward to the results of the 2017 Tax Cuts and Jobs Act, one of the most significant restructurings in a generation. The positive impact of Ohio Opportunity Zones is already being felt.
One example of an Opportunity Zone is the current Hoover YMCA Park on 56 acres of land in Lockbourne, Ohio. Whether you want to keep the property as a recreational site or proceed with rezoning, the site offers significant potential for growth. The property is listed at $1.5 million and can be purchased in part using capital gains funds.
The property’s proximity to Pizzuti’s Creekside Industrial Center and Rickenbacker International Airport only adds to its appeal. This site at 1570 Rohr Road is precisely the type of improvement project envisioned by an Opportunity Zone reinvestment initiative. If interested in purchasing, Skip Weiler, The Robert Weiler Company president and lead brokerage consultant, is your best contact; he can be reached at 614-221-4286.
You Deserve the Right Opportunity
Earlier this year, the name Gable echoed through time once again with the premature passing of Clark Gable III, the late actor’s grandson. Gable III, an actor and model, was just coming into his own. So, it’s fitting that his family roots are in Ohio – the “heart” of America’s Heartland. The phrase conjures up wholesome images of traditional family values and good stock upbringing, mixed with a healthy dose of Midwestern pragmatism.
If Clark Gable were alive today, he would likely approve how his home state has developed, while retaining its heartland mentality. And, Opportunity Zones are the latest tool empowering Ohioans to help their fellow citizens. The “opportunity” created by Opportunity Zones ensures that an even better future awaits – for Gables’ descendants and everyone else who calls our fantastic state their home.
An investment in an Opportunity Zone is only a phone call away! The Robert Weiler Company, a Columbus-based commercial real estate and appraisal firm, understands the market in Ohio. And, our brokers can help you with the purchase of property within selected Ohio Opportunity Zones. Reach out to our team at 614-221-4286 to turn your capital gains into a significant tax advantage!